Equity and the Article I Court: Is the Tax Court's Exercise of Equitable Powers Constitutional?

Abstract

Article I courts are the other federal courts, infrequently studied despite their important role in the judiciary. This article focuses on the United States Tax Court, an Article I court that hears approximately 95 percent of litigated federal tax cases. The article argues that the Tax Court's current tendency to apply equitable doctrines when necessary to avoid harsh outcomes dictated by statute lacks constitutional authority. First, the article examines the role of Article I courts in the federal judicial system and under the Constitution. Next, it considers the historical and modern meanings of equity and equitable powers in the context of the distinction between law and equity. The article then discusses the Tax Court's use of equity, focusing on the doctrines of equitable recoupment, equitable estoppel, and equitable relief from joint and several tax liability for an innocent spouse. Finally, it examines possible sources of equitable power for the Tax Court, including applicable statutes, and the possible equity-like ancestry of Tax Court overpayment claims. The article concludes that Article I courts have limited sources of equitable power, and that for the Tax Court to apply equitable principles as it has been doing, Congress will need to take appropriate action - within constitutional limits - to broaden or redefine the jurisdiction of the court.